Spinvox close to $150 million exit to Nuance? Not so fast

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[UK] Spinvox, Spinvox, Spinvox. It promised so much but in the end delivered only so much. Like a latter-day Boo.com it hyped its magical voice-to-text service to the stars, apparently built on highly advanced technology, but in the end it has not lived up to the expectations it went all out to trumpet.

Nuance, possibly the leader in speech-to-text processing, and with 40+ carrier relationship, is reportedly picking up Spinvox in a $150 million sale which might be completed before Christmas. But there was no source on the Sunday Times story and Spinvox tells us they aren’t commenting at all. The Sunday Times is often used as a vehicle to float ‘sale rumours’ which are actually designed to flush out more bidders.

This story could have been different, but the exit route to another likely suitor was cut off when SimulScribe, the ‘scrappy’ voicemail transcription company, effectively exited in an exclusive deal with Ditech Networksthat worth as much as $17 million back in September. It could be argued that SimulScribe played it right, setting expectations at a realisable level and executing on that promise.

The Sunday Times story did mention a deadline for the £30 million bridging loan which “has been rolled over to January to allow the takeover to be completed”. In other words, the Nuance deal smells genuine.

Spinvox raised between £120m and £150m in capital from GLG Partners, Goldman Sachs, Toscafund Asset Management and Blue Mountain Capital Management. The latest rounds came in the form not of new investment but of various tough-terms bridging loans totalling £73m.

With forecast revenues (not profit) next year of only £7m, Spinvox has had no collateral assets or cashflow to service these high interest loans. So equity holders have thus taken second place to those that had loaned the cash.

As others note, if this deal goes through Spinvox will have effectively turned £150m of investors capital into £92m. Now that’s one kind of translation service.

Executives and staff come last in this food chain, behind those that have put in the loans. Thus it seems unlikely that CEO Christina Domecq (pictured), who has presided over all this, will remain with the company if the sale goes through.

As usual, you can raise lots of capital with great powerpoint and PR, but it’s not the same as building, testing, iterating and improving. Spinvox was basically the exact opposite of a lean startup.

And then in September a major investor wrote down its investment by 90% Invesco Perpetual said it has written down the value of its £759,000 investment to, er, £76,000.

What remains?

Plenty of egg on a few faces. First of all on us, as we gave them a Europas award (doh!), although to be fair we still think voice to text apps rock. But mainly on CEO Christina Domecq who paid staff in stock rather than cash over the summer. Although this didn’t work for all of them. Domecq told press in September that SpinVox would become cashflow and EBITDA-positive after their Latin America launch, within 90 days. We’re now well over that target.

Egg is also on the faces of shareholders, many of whom probably got a look at the anonymous dossier which went around various people and which detailed interesting spending of company funds.

Also, alas, on Dragon’s Den celeb, Ariadne Capital chief and Spinvox advisor Julie Meyer, who defended Spinvox and Domecq to the hilt, even saying Spinvox was “already profitable” and “conversion revenue is going through the roof” back in August.

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CrunchBase

OverviewSpinvox is a voice to text service. Spinvox started with their (now patented) Voice Message Conversion System in 2005, becoming one of the first companies to convert voicemails to text messages for both landlines and mobile telephones. Users subscribed to the service have incoming voicemail converted and sent as text messages to their mobile phone or emails in their inbox.
In order to compete with …